The other day I blogged about increasing fees through perceived value pricing. Today I want to take this strategy one step further, by showing you how it can be used to attract clients as well.
Let me introduce you to Dennis:
Dennis is an attorney in private practice. For the first 7 years he billed by the hour. His practice was growing and he was pleased with his ability to attract clients. Dennis is good at what he does. But then the economy took a nosedive. Dennis noticed that people were nitpicking every detail of their bills. Although he never over-charged anyone, he found himself discounting his fees just to make them happy. Despite the fact that he lowered some invoices, Dennis was left with the nagging feeling that it wasn’t enough. Referrals started to decline and his business was suffering.
I introduced the concept of perceived value pricing about 8 months ago and explained that it’s based upon determining a fixed fee that’s in alignment with their perception of the benefits they would receive from his legal services. I suggested that he could make more money, eliminate haggling and end up with happier customers. I also mentioned that I thought he could attract clients this way.
At first Dennis was a bit nervous about the idea, but agreed to give it a try. Each time someone came in with an appropriate new matter, Dennis took all of the info, and promised to get back to them in two days with a fixed fee. We then considered what the successful completion of this matter would be worth to them. Out of 6 new matters he worked this way during the first month, 5 resulted in fees that were higher than he would have billed using the hourly model, amounting to a net fee increase of 22%.
But the best part was yet to come. Dennis stopped discounting services, because customers no longer complain about why it took Dennis 45 minutes to resolve an issue with the courts, or that he spent 20 minutes on the phone with them Tuesday, and an hour and a half the following Friday. Instead, he’s seen an increase in customer satisfaction, and perceived value pricing has helped him attract clients as well. His referrals have increased by 14%.
To learn more about pricing your services and being more profitable in your business, click here to read about PROFIT, my Small Business Profitability Program.
Susan Martin, Marketing Coaching
